The Corporate Value of (Corrupt) Lobbying
52 Pages Posted: 16 Mar 2012 Last revised: 23 Mar 2018
Date Written: February 4, 2015
Using an event study, we examine whether the stock market considers corporate lobbying to be a value-enhancing activity. On January 3, 2006, lobbyist Jack Abramoff pleaded guilty to bribing politicians, which generated intense scrutiny of lobbyists, limiting their political influence. Using this event as a negative exogenous shock to the ability of firms to lobby, we show that a firm that spends $100,000 more on lobbying in the three years prior to 2006, experiences a loss of about $1.2 million in value around the guilty plea. We also find results consistent with the view that part of the value from lobbying may arise from potentially unethical practices.
Keywords: corruption, event study, lobbying, political connections, shareholder value
JEL Classification: G14, G18, G38, D72
Suggested Citation: Suggested Citation